Global: SEC Charges ‘Fraudsters’ in $300 Million ‘Crypto Pyramid and Ponzi Scheme’

The Securities and Exchange Commission has charged 11 people for their roles in what the agency is calling a “fraudulent crypto pyramid and Ponzi scheme.”

Forsage allegedly raised more than $300 million from retail investors in an illicit way, in countries across the globe including the United States, according to an SEC statement. The agency charged the organization’s four founders and a series of people with promoting the nine-figure scheme.

“Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains,” said Carolyn Welshhans, acting chief of the SEC’s Crypto Assets and Cyber Unit, which led the investigation.

According to the SEC’s criminal complaint in 2020, founders based in Russia, the Republic of Georgia, and Indonesia created Forsage, a website that allowed millions of retail investors to transact via smart contracts using the Ethereum, Tron, and Binance blockchains.

Users of Forsage earned returns by recruiting other people to join the alleged scheme, which took place for over two years. Additionally, Forsage allegedly used funds from new investors to pay earlier investors, which the SEC said is typical of Ponzi schemes.

Cease-and-desist actions were taken by regulators in the Philippines and the Montana Commissioner of Securities and Insurance, which made contact with Forsage in March of 2021. According to the SEC, the individuals accused in the case continued promoting the scheme, and denied the allegations, in several YouTube videos.

A YouTube channel that claims to be the official one for Forsage has garnered around 170,000 views and has roughly 6,500 subscribers. It includes videos—most roughly a minute long—of people talking about how their lives have been improved by Forsage.

At the same time, Forsage’s website claims to have brought in over 2 million participants. It says around 2,500 people have joined Forsage in the past day and that members have been rewarded with over $1.35 billion in value, presumably since the website was launched.

While the founders of Forsage are based outside the U.S., the SEC has charged Americans living in Illinois, Mississippi, Kentucky, and Florida with allegedly helping to promote the scheme.